Paulson lets incoming president pick up bill

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"The new Congress and the next administration must decide what role government in general, and these entities in particular, should play in the housing market," Treasury Secretary Hank Paulson said.

William Poole, an outspoken former Federal Reserve president from St Louis, acknowledged that motivation but said it was wrong.

"Some of this is a stopgap to try to prevent the mortgage market from falling apart," Poole said on Bloomberg Radio. But he believed transferring risks to taxpayers was "an unacceptable situation".

Freddie and Fannie's problems along with a near $500billion budget deficit will be inherited by either Barack Obama or John McCain in January. Democratic hopeful Obama said that "some" intervention was necessary to prevent a "larger and deeper crisis".

"The plan must move toward clarifying the true public and private status of our housing policies," he said.

His Republican opponent McCain said: "We've got to keep people in their homes.

"There's got to be restructuring, there's got to be reorganisation, and there's got to be some confidence that we've stopped this downward spiral."